Consumer Law Changes - what business owners need to know

The Treasury Laws Amendment (More Competition, Better Prices) Act 2022 came into effect on 9 November 2023 and businesses are now facing fines of up to $50,000,000.00 for including unfair contract terms in their agreements under the sweeping changes which came into effect with the Act.

The Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (“the Act”) makes broad changes to the current scope of unfair contract terms and introduces a penalty regime for businesses found to be in breach of the new provisions.

PREVIOUS LEGISLATION

Previously, the unfair contracts regime had fairly limited scope and only applied when a business had a standard form contract that was either:

• a consumer contract; or
• a small business contract.

WHAT IS A SMALL BUSINESS CONTRACT?

A small business contract previously was defined as one where:

• one party had fewer than 20 employees;
• the upfront price was less than $300,000.00; or
• the contract was longer than 12 months and the price did not exceed $1,000,000.00.

One of the most significant changes under the Act was to change the definition of a small business contract to one where either or both of the following apply:

• a least one party to the contract employs fewer than 100 persons; or
• a least one party to the contract has annual turnover of less than $10,000,000.00.

According to the Australian Bureau of Statistics, 92.6% of businesses in Australia have less than $2,000,000.00 in annual turnover, which means almost any business-to-business dealing in Australia will potentially be caught by the new provisions.

INCREASED PENALTIES

In addition, the new penalty regime means that corporations who are found to include an unfair contract term or seeks to enforce same in respect of a qualifying contract will commit an offence where the maximum penalty is the higher of $50,000,000.00 or 30% of the company’s annual turnover for the relevant period.

Individuals who are involved in a contravention face maximum penalties of $2,500,000.00.

WHAT IS A STANDARD FORM CONTACT?

While there is no strict definition of what constitutes a standard form contract, it is a broad term and does not necessarily align with the common usage of the term.  For example, a contract may be considered standard form even where the consumer or small business can negotiate some of the terms.

In our view, it is possible that standard terms of trade incorporated into quotations, purchase orders, credit applications or sale agreements all have the potential to be covered by the legislation.

What is “unfair” is also not strictly defined and needs to be assessed on a case by case, and customer by customer basis.  What is fair for one customer may not be fair for another.

If you have any concerns about whether or not the contract documents you currently use in your business might be covered by the new provisions or contain clauses which might be considered unfair, you should contact one of our competition and consumer law experts as soon as possible to arrange a contract review as soon as possible.